Written by Grace Khouri – Financial Markets Junior Analyst- April 14, 2016 09:32 GMT
Will commodity prices rebound?
Will the BRICs (Brazil, Russia, India and China), which collectively account for more than half of the world’s population, possess huge domestic market growth prospects?
Will the U.S. Fed raise interest rates?
All these questions occur in the minds of investors when it comes to investing. The answers to the above questions will change investor’s decision based on how they analyze and see the market. However, some countries are known to be better and safer than other countries. By watching the market carefully and comparing it to historical events, an investor can distinguish which countries might be an opportunity. You can find below a small study done by our team about the most promising markets to invest in:
Driven by a strong expansion in India, coupled with favorable oil prices, economic growth in South Asia is expected to accelerate. The region is among the greatest global beneficiaries from cheap oil, as all countries in it are net oil importers. South Asia is considered as the world’s fastest growing region according to the World Bank with overall economic growth projected at 7.4% for 2016. Given India’s weight in regional Gross Domestic Product (GDP), the projections reflect to a large extent India’s expected growth acceleration, driven by business-oriented reforms and improved investor sentiment. It is now in the stage of economic development that China was in a decade ago. The country is attempting to shift from consumption- to investment-led growth. The International Monetary Fund (IMF) stated that India is in a highly favorable position for economic growth.
Slowdown in the manufacturing sector and the export business taking a hit are compelling china to turn into a consumer driven economy. This phase is expected to be painful. But for patient investors, the returns are expected to be encouraging if they choose to remain invested in the service sector over the long run. While the service sector was on an expansionary mode in February, retail sales registered double-digit growth during the first two months of this year. China has also been leading the effort of global non-western countries to create a new system to govern the world economy. China’s state-owned enterprises (SOEs) are currently valued at assets of $15.7 trillion, and the government plan is likely to make way for more private enterprises that will offer additional investment opportunities.
Emerging markets have outperformed developed markets. Comparing emerging markets to the developed world, the iShares MSCI Emerging markets ETF rose 13% as of March 13 compared to the Vanguard FTSE Developed Markets ETF, which saw a rise of only 9.9% as of the same date. Latin American equity, especially Brazil, seems to be getting a definite boost from the reversal in commodity prices. The Brazilian real is up 10 per cent so far this year against the US dollar, outperforming every other major emerging market currencies. If the rally continues, we can expect the upsurge to continue as well. Brazil remains the cheapest option when you compare valuations across Latin American economies such as Brazil, Chile, Mexico and Argentina. Meanwhile, Brazilian dollar debt has staged some of the biggest rallies among EM bonds, with yields on its 2017 bond falling by nearly half to 1.7 percent and those for its 2025 bond dropping by more than 150 basis points to 5.743 per cent. As a result of the above, investing in Brazil could put you in a brighter spot with time.
– United States:
Over the long term, the U.S. economy has enjoyed solid economic performance. As pointed out by growth economists, sustained growth of per capita real GDP of around 2% per year has been a hallmark of the U.S. economy. It expanded an annualized 1.4 percent on quarter in the last three months of 2015, higher than a second estimate of 1 percent, according to final figures released by the Bureau of Economic Analysis. US equities have risen more than 12 per cent from their low in February, with the S&P 500 turning positive for the year of Tuesday after Janet Yellen, the Federal Reserve chair, said the central bank would proceed cautiously on raising interest rates. The continuing strength of the U.S. dollar is likely to aid the growth of domestic companies in 2016 and beyond.